…with the properties fully rented for all 12 months. The rent was even paid right on time. It was my lowest-stress year as a landlord on record, and yet this is the worst possible situation for tax purposes.

Why? Because she didn’t re-invest the income in property improvements, which would have increased their value while also giving her more deductions to work with.

Mistake #5: Failing to Remain Competitive Within My Field

The last one I’ll share is perhaps the worst of all, since it’s about more than just money.

If I don’t recover from this one, I could pay years of penance, not just suffer through one dismal tax year. My earning potential is something I need to carefully nurture, and that’s why I’m kicking myself.

Sasha plans on remedying this in 2008:

I’m going to start by writing out an action plan for getting my skills back up to snuff. Once I have established clear, S.M.A.R.T. goals, I will set aside at least 30 minutes a day to focus (no multitasking!) on these efforts, whether reading industry publications, attending training, pursuing a skill-building project or networking to learn the latest strategies.

Property improvements are typically not deductible – only repairs are. The cost of improvements adjust the cost basis when/if she sells, so will reduce the taxes paid on the sale…but the first $250K profit from the sale is usually exempt from taxes anyway.

Equipment, appliances, etc. can be depreciated, but not deducted straight-out.

She outlines three ways she could have offset her income, all of which are considered improvements per IRS Pub 527.

So, unless you are planning to exceed $250K of profit when you sell, it’s better to just keep playing slumlord :)